Liquidity

Timothy S. Fuerst ()

No 900, Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: This paper develops a general equilibrium model of two traditional explanations of the monetary "black box" linking money and real activity: the liquidity effect and the loanable funds effect. These effects are modeled with a monetary production economy in which central bank injections of cash are funnelled into the economy through the credit market. As a result, only borrowers have direct access to the newly injected cash. The model has several interesting implications: 1) monetary injections cause fluctuations in asset prices for non-Fisherian reasons, 2) monetary injections increase current and future real activity, and, 3) the central bank has the ability to dampen or magnify fluctuations in real activity.

Date: 1990-04

Downloads: (external link)
http://www.kellogg.northwestern.edu/research/math/papers/900.pdf main text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:nwu:cmsems:900

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science
Address: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
Contact information at EDIRC.
Series data maintained by Fran Walker ().